Expanding the NRL: financial and legal challenges (Part 1)

For any rugby league fan in Australia, whispers of expanding the national first grade competition[1], the National Rugby League (NRL), brings great interest and debate. In recent months, the Australian Rugby League Commission (ARLC) Chairman Peter V'landys and NRL CEO Andrew Abdo have expressed concrete plans to add a second Brisbane-based club in 2023[2] and hope to introduce a further 18^th club to the league by 2027[3].

In a three-horse race for the Brisbane franchise, the NRL has received official bids from the Brisbane Jets, Redcliffe Dolphins and Brisbane Firehawks[4]. For the 2027 expansion, the favourite is a second New Zealand franchise to compete with the New Zealand Warriors, such as the Wellington-based Southern Orcas.

The fervour to expand the NRL seeks to match ongoing proposals for expansion from other codes such as the Australian Football League and the Australia’s national soccer competition, the A-League[5]. The benefits of expansion are obvious – it would:

• Foster increased fan engagement from new geographical areas;
• Increase the volume of professional matches to be televised; and
• Provide greater opportunity for corporate sponsorships and advertising.

While NRL executives are touting these prospects, many question the league’s ability to sustain expansion.[6] As spectator demand, sponsorship and player talent are spread across more teams, this can affect the quality of the product. According to a recent report commissioned by existing NRL teams and published by Gemba, a consultancy, a new Queensland NRL team would generate between $15.5m and $33.7m in revenue.[7] However, as new teams ‘cannibalise’ existing fans, the report concludes these gains would be insufficient to offset the negative impacts to existing NRL clubs. Alongside these league-wide considerations, each prospective club must consider what challenges joining a professional league involves.

With these concerns in mind, this article series explores some of the legal and commercial challenges a new franchise and the NRL will need navigate. The series is in two parts:

1. Part I focuses on the legal issues regarding initial financing and what could occur if a new club goes into financial distress.
2. Part II focuses on the legal, regulatory and governance considerations of the corporate structure and the profit sharing and competition issues with regards to existing clubs.

Part II is available here.